Wayfair Inc. 10-Q

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Statements This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q, including statements regarding our investment plans and anticipated returns on those investments; our future customer growth; our future results of operations and financial position; including our exit from the German market; available liquidity and access to financing sources; our business strategy, plans and objectives of management for future operations, including our international growth and omni-channel strategy; consumer activity and behaviors; developments in our technology and systems and anticipated results of those developments; and the impact of macroeconomic events, including tariffs, interest rates, inflation and changes in tariffs and global trade relations, and our response to such events, are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “aim,” “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “continues,” “could,” “intends,” “goals,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts” or “potential” or the negative of these terms or other similar expressions. Forward-looking statements are based on current expectations of future events. We cannot guarantee that any forward-looking statement will be accurate, although we believe that we have been reasonable in our expectations and assumptions. Investors should realize that if underlying assumptions prove inaccurate or that known or unknown risks or uncertainties materialize, actual results could vary materially from Wayfair’s expectations and projections. Investors are therefore cautioned not to place undue reliance on any forward-looking statements. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and, except as required by applicable law, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of any new information, future events or otherwise. Factors that could cause or contribute to differences in our future results include, without limitation, the following: • adverse macroeconomic conditions, including: economic instability; changes in laws and regulations and other governmental actions or policies, including those related to taxes and new or increased tariffs, and the uncertainty surrounding potential changes in such laws and regulations or other potential governmental actions or policies; export controls; sustained higher interest rates and inflation; slower growth or the potential for recession; disruptions in the global supply chain and other conditions affecting the retail environment for products we sell; and other matters that influence consumer spending and preferences, as well as our ability to plan for and respond to the impact of these conditions; • our ability to manage the impacts of our restructurings and workforce reductions, including our exit from the German market; • our ability to acquire and retain customers in a cost-effective manner; • our ability to increase our net revenue per active customer; • our ability to build and maintain strong brands; 20 Table of Contents • our ability to expand our business and compete successfully; • disruptions, capacity constraints or inefficiencies in our information systems network, or any potential cybersecurity incident; • geopolitical events, natural disasters, public health emergencies, civil disturbances and terrorist attacks; and • developments in, and the outcome of, legal and regulatory proceedings and investigations to which we are a party or are subject, and the liabilities, obligations and expenses, if any, that we may incur in connection therewith. A further list and description of risks, uncertainties and other factors that could cause or contribute to differences in our future results include the cautionary statements herein and in our other filings with the Securities and Exchange Commission, including those set forth under Part I, Item 1A, Risk Factors, in our Annual Report on Form 10-K for the year ended December 31, 2024. We qualify all of our forward-looking statements by these cautionary statements. All dollar and percentage comparisons made herein refer to the three months ended March 31, 2025 compared to the three months ended March 31, 2024, unless otherwise noted. Overview Wayfair is the destination for all things home. Through our e-commerce business model, we offer visually inspired browsing, compelling merchandising, easy product discovery and attractive prices for over 30 million products from over 20 thousand suppliers. We believe an increasing portion of the dollars spent on home goods will be spent online and that there is an opportunity for acquiring more market share. Our business model is designed to grow our net revenue by acquiring new customers as well as stimulating repeat purchases from our existing customers. Through increasing brand awareness as well as paid and unpaid advertising, we attract new and repeat customers to our family of sites. We aim to turn these customers into recurring shoppers by creating a seamless shopping experience across their entire journey — offering best-in-class product discovery, purchasing, fulfillment and customer service. During the three months ended March 31, 2025, net revenue increased by 0.04% compared to the same period in 2024. As of March 31, 2025, we had 21 million active customers and during the three months ended March 31, 2025, 80.2% of orders came from repeat buyers. The increased sales were due to higher average order value, partially offset by lower volume, which was driven by challenges in the category such as macroeconomic pressures, including consumer spending patterns and housing market conditions, compared to the same period in 2024. We also continued to manage our advertising spend according to a return on investment-oriented approach that carefully tracks and monitors the results of advertising campaigns as we seek to maintain appropriate return targets. Global Considerations As disclosed in Part I, Item 1A, Risk Factors, of our Annual Report on Form 10-K for the year ended December 31, 2024, our business is subject to risks related to trade policy, including new or increased tariffs by the United States (“U.S.”) and/or other foreign governments. Starting in the first quarter of 2025, the U.S. government announced additional tariffs on goods imported into the U.S. from numerous countries, including the home goods category, and multiple nations have announced tariffs and other actions in response. Trade negotiations are ongoing, but overall the global trade environment remains fluid and highly uncertain. Despite this uncertainty, we believe the structural characteristics of our retail platform position us to capture incremental market share within a category that is largely unbranded and highly substitutable. We have and will continue to partner with our suppliers to help them strategize and deliver value for our customers. Further, we continue to closely monitor additional macroeconomic conditions, including, but not limited to, general economic instability, changes in tax laws or regulations or other governmental actions or policies, sustained higher interest rates and inflationary pressures, on our business, results of operations and financial results. These developments have and may continue to negatively impact global economic activity and consumer behavior, which have and may continue to adversely affect our business and our results of operations. As our customers react to these global economic conditions, we may take additional precautionary measures to limit or delay expenditures and preserve capital and liquidity. While it is difficult to quantify and predict the impacts of these global and domestic economic events, including fluctuating interest rates, inflationary pressures and changes in global trade policy on our business and to predict consumer spending in the near term, we believe the long-term opportunity that we see for shopping for the home online remains unchanged. 21 Table of Contents We will continue to monitor economic conditions as we work to manage our business to meet the evolving needs of our customers, employees, suppliers, partners, stockholders and communities. Factors Affecting our Performance We believe that our performance and future success depend on a number of factors that present significant opportunities for us but also pose risks and challenges, including those discussed in Part I, Item 1A, Risk Factors, in our Annual Report on Form 10-K for the year ended December 31, 2024. Key Financial Statement and Operating Metrics We measure our business using the key financial statement and operating metrics that are reflected in the below table. See “Non-GAAP Financial Measures” below for more information regarding our use of Adjusted EBITDA, Free Cash Flow and Adjusted Diluted Earnings or Loss per Share and a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measure that is prepared in accordance with accounting principles generally accepted in the United States of America or “GAAP.” Our Free Cash Flow and Adjusted Diluted Earnings or Loss per Share are measured on a consolidated basis, while our Adjusted EBITDA is measured on a consolidated and reportable segment basis. All other key financial statement and operating metrics are derived and reported from our consolidated net revenue. We use the following metrics to assess the near and longer-term performance of our overall business: Three Months Ended March 31, 2025 2024 (in millions, except LTM net revenue per active customer, average order value and per share data) Key Financial Statement Metrics: Net revenue $ 2,730 $ 2,729 Gross profit $ 837 $ 819 Loss from operations $ (122) $ (235) Net loss $ (113) $ (248) Loss per share: Basic $ (0.89) $ (2.06) Diluted $ (0.89) $ (2.06) Net cash used in operating activities $ (96) $ (139) Key Operating Metrics: Active customers (1) 21 22 LTM net revenue per active customer (2) $ 562 $ 537 Orders delivered (3) 9 10 Average order value (4) $ 301 $ 285 Non-GAAP Financial Measures: Adjusted EBITDA $ 106 $ 75 Free Cash Flow $ (139) $ (193) Adjusted Diluted Earnings (Loss) per Share $ 0.10 $ (0.32) (1) The number of active customers represents the total number of individual customers who have purchased at least once directly from our sites during the preceding twelve-month period. The change in active customers in a reported period captures both the inflow of new customers as well as the outflow of existing customers who have not made a purchase in the last twelve months. We view the number of active customers as a key indicator of our growth. 22 Table of Contents (2) Last twelve months (“LTM”) net revenue per active customer represents our total net revenue in the last twelve months divided by our total number of active customers for the same preceding twelve-month period. We view LTM net revenue per active customer as a key indicator of our customers’ purchasing patterns, including their initial and repeat purchase behavior. (3) Orders delivered represent the total orders delivered in any period, inclusive of orders that may eventually be returned. As we ship a large volume of packages through multiple carriers, actual delivery dates may not always be available, and as such we estimate delivery dates based on historical data. We recognize net revenue when an order is delivered, and therefore orders delivered, together with average order value, is an indicator of the net revenue we expect to recognize in a given period. We view orders delivered as a key indicator of our growth. (4) We define average order value as total net revenue in a given period divided by the orders delivered in that period. We view average order value as a key indicator of the mix of products on our sites, the mix of offers and promotions and the purchasing behavior of our customers. Results of Consolidated Operations Comparison of the three months ended March 31, 2025 and 2024 Net revenue During the three months ended March 31, 2025, net revenue increased by $1 million, or was close to flat, compared to the same period in 2024, representing a marginal increase amid persistent macroeconomics pressures on consumers. The increase in net revenue is due to higher average order value, partially offset by lower order volume, which was driven by challenges in the category such as macroeconomic pressures, including consumer spending patterns and housing market conditions, compared to the same period in 2024. During the three months ended March 31, 2025, our U.S. net revenue increased by 1.6%. During the three months ended March 31, 2025, our International net revenue decreased by 10.9% compared to the same period in 2024, primarily due to the exit of our German business. During the three months ended March 31, 2025, International Net Revenue Constant Currency Growth was (7.1)% (see “Non-GAAP Financial Measures” below for more information regarding our use of Net Revenue Constant Currency Growth). Three Months Ended March 31, 2025 2024 % Change (in millions) U.S. net revenue $ 2,429 $ 2,391 1.6 % International net revenue 301 338 (10.9) % Net revenue $ 2,730 $ 2,729 — % For more information on our segments, see Note 9, Segment and Geographic Information , included in Part I, Item 1, Financial Statements , in this Quarterly Report on Form 10-Q. Cost of goods sold Cost of goods sold is sensitive to many factors, including quarter-to-quarter variability in product mix, pricing strategies, changes in wholesale, shipping and fulfillment costs, including associated applicable customs duties and fees earned for supplier services rendered. During the three months ended March 31, 2025, cost of goods sold decreased by $17 million, or 0.9%, compared to the same period in 2024. The decrease in cost of goods sold is driven by lower order volume and a benefit recognized during the three months ended March 31, 2025 related to a resolution on the valuation of duties, compared to the same period in 2024. As a percentage of net revenue, cost of goods sold decreased to 69.3% for the three months ended March 31, 2025 compared to 70.0% in the same period in 2024, primarily due to lower order volume. 23 Table of Contents Three Months Ended March 31, 2025 2024 % Change (in millions) Cost of goods sold $ 1,893 $ 1,910 (0.9) % As a percentage of net revenue 69.3 % 70.0 % Operating expenses Operating expenses consist of customer service and merchant fees, advertising, selling, operations, technology, general and administrative expenses, impairment and other related net charges and restructuring charges. We disclose separately the equity-based compensation and related taxes that are included in customer service and merchant fees and selling, operations, technology and general and administrative expenses. Three Months Ended March 31, 2025 2024 % Change (in millions) Customer service and merchant fees (1) $ 107 $ 117 (8.5) % Advertising 344 324 6.2 % Selling, operations, technology, general and administrative (1) 429 534 (19.7) % Impairment and other related net charges 23 — 100.0 % Restructuring charges 56 79 (29.1) % Total operating expenses $ 959 $ 1,054 (9.0) % As a percentage of net revenue: Customer service and merchant fees (1) 3.9 % 4.3 % Advertising 12.6 % 11.9 % Selling, operations, technology, general and administrative (1) 15.7 % 19.6 % Impairment and other related net charges 0.8 % — % Restructuring charges 2.1 % 2.9 % 35.1 % 38.7 % (1) Includes equity-based compensation and related taxes as follows: Three Months Ended March 31, 2025 2024 (in millions) Customer service and merchant fees $ 3 $ 6 Selling, operations, technology, general and administrative $ 63 $ 118 During the three months ended March 31, 2025, our equity-based compensation and related taxes included in customer service and merchant fees and selling, operations, technology, general and administrative decreased by $58 million, or 46.8%, compared to the same period in 2024. The decrease is driven by workforce reductions. The following table summarizes operating expenses as a percentage of net revenue, excluding equity-based compensation and related taxes: Three Months Ended March 31, 2025 2024 Customer service and merchant fees 3.8 % 4.1 % Selling, operations, technology, general and administrative 13.4 % 15.2 % 24 Table of Contents Customer Service and Merchant Fees During the three months ended March 31, 2025, excluding the impact of equity-based compensation, our expenses for customer service and merchant fees decreased by $7 million, or 6.3%, compared to the same period in 2024. The decrease in customer service and merchant fees is primarily due to decreased compensation costs, driven by workforce reductions. As a percentage of net revenue, total customer service and merchant fees decreased to 3.9% for the three months ended March 31, 2025 compared to 4.3% in the same period in 2024 primarily due to decreased compensation costs. Advertising During the three months ended March 31, 2025, our advertising expenses increased by $20 million, or 6.2%, compared to the same period in 2024. The increase reflects our response to changing market conditions and renewed investment opportunities as we seek to maintain our return targets across various channels. As a percentage of net revenue, advertising expenses increased to 12.6% for the three months ended March 31, 2025 compared to 11.9% in the same period in 2024 due to changes in our advertising channel mix as we seek to maximize returns on advertising spend within our efficiency parameters. Selling, operations, technology, general and administrative During the three months ended March 31, 2025, excluding the impact of equity-based compensation and related taxes, our expenses for selling, operations, technology, general and administrative activities decreased by $50 million, or 12.0%, compared to the same period in 2024. The decrease is primarily due to decreased compensation costs, driven by workforce reductions. As a percentage of net revenue, total selling, operations, technology, general and administrative expenses decreased to 15.7% for the three months ended March 31, 2025, compared to 19.6% in the same period in 2024, primarily due to decreased compensation costs. Impairment and other related net charges During the three months ended March 31, 2025, impairment and other related charges increased by $23 million or 100.0%, compared to the same period in 2024. As a percentage of net revenue, impairment and other related charges increased to 0.8% from 0.0% in the same period in 2024. During the three months ended March 31, 2025, we recorded net charges of $23 million, inclusive of $20 million associated with the Germany Restructuring and weakened macroeconomic conditions in connection with our German operations and $3 million associated with changes in sublease market conditions for a technology center in the U.S. Refer to Note 2, Supplemental Financial Statement Disclosures , included in Part I, Item 1, Financial Statements , in this Quarterly Report on Form 10-Q for additional information. Restructuring charges During the three months ended March 31, 2025, restructuring charges decreased by $23 million or 29.1% as compared to the same period in 2024. As a percentage of net revenue, restructuring charges decreased to 2.1% from 2.9% in the same period in 2024. During the three months ended March 31, 2025, we incurred $56 million of charges consisting primarily of one-time employee severance, benefits, relocation and transition costs. This is inclusive of $40 million related to the Germany Restructuring and $16 million related to the March 2025 workforce reduction. During the three months ended March 31, 2024, we incurred $79 million of charges consisting primarily of one-time employee severance and benefit costs associated with the January 2024 workforce reduction. Interest expense, net During the three months ended March 31, 2025, interest expense, net increased by $17 million or 283.3%, compared to the same period in 2024, primarily driven by the issuance of the 2029 Secured Notes (as defined below) in October 2024. 25 Table of Contents Three Months Ended March 31, 2025 2024 % Change (in millions) Interest expense, net $ (23) $ (6) 283.3 % Other income (expense), net During the three months ended March 31, 2025, other income (expense), net increased by $14 million or 350.0%, compared to the same period in 2024, primarily driven by foreign currency transaction gains. Included in other income (expense), net are changes in foreign currency transaction gains and losses and long-term investment income or losses. Three Months Ended March 31, 2025 2024 % Change (in millions) Other income (expense), net $ 10 $ (4) 350.0 % Gain on debt extinguishment During the three months ended March 31, 2025, gain on debt extinguishment increased by $25 million, or 100.0%. During the three months ended March 31, 2025, and in connection with the issuance of the 2030 Secured Notes (as defined below), we recorded a $25 million gain on debt extinguishment, representing the difference between the cash paid for principal, plus accrued and unpaid interest and transaction fees of $551 million and the net carrying value of the 2026 Notes (as defined below) of $576 million. Refer to Note 4, Debt and Other Financing , included in Part I, Item 1, Financial Statements , in this Quarterly Report on Form 10-Q for additional information. Three Months Ended March 31, 2025 2024 % Change (in millions) Gain on debt extinguishment $ 25 $ — 100.0 % Provision for income taxes During the three months ended March 31, 2025, our provision for income taxes remained constant at $3 million compared to the same period in 2024, primarily related to the level and mix of income earned in the U.S. and certain foreign jurisdictions and U.S. state income taxes. Three Months Ended March 31, 2025 2024 % Change (in millions) Provision for income taxes $ 3 $ 3 — % 26 Table of Contents Liquidity and Capital Resources Sources of Liquidity As of March 31, 2025, our principal source of liquidity was cash and cash equivalents and short-term investments totaling $1.4 billion. Additionally, we have a $500 million senior secured revolving credit facility that matures on March 13, 2030 (the “Revolver”). As of March 31, 2025, there were no revolving loans outstanding under the Revolver. We had outstanding letters of credit, primarily as security for certain lease agreements, fo r $71 million a s of March 31, 2025, which reduced the availability of credit under the Revolver. Excluding liquidity available through our Revolver, the following table shows sources of liquidity for the periods presented: March 31, December 31, 2025 2024 (in millions) Cash and cash equivalents $ 1,338 $ 1,316 Short-term investments 30 56 Total liquidity $ 1,368 $ 1,372 We believe that our existing cash and cash equivalents and investments, cash generated from operations and the borrowing availability under our Revolver will be sufficient to meet our anticipated cash needs for at least the foreseeable future including planned capital expenditures, contractual obligations and other such requirements. However, our liquidity assumptions may prove to be incorrect, and we could exhaust our available financial resources sooner than we currently expect. In addition, we may elect to raise additional funds at any time through equity, equity-linked or debt financing arrangements. Further, we may from time to time seek to retire, restructure, repurchase or redeem, or otherwise mitigate the equity dilution associated with our outstanding convertible debt through cash purchases, stock buybacks of some or all of the shares underlying convertible notes and/or exchanges for equity or debt in open-market purchases, privately negotiated transactions or otherwise. Such repurchases, exchanges or liability management exercises, if any, will be upon such terms and at such prices and sizes as we may determine, and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material. Our future capital requirements and the adequacy of available funds will depend on many factors, including those described herein and in our other filings with the SEC, including those set forth in Part I, Item 1A, Risk Factors in our Annual Report on 10-K for the year ended December 31, 2024. In addition, macroeconomic events have caused disruption in the capital markets, including increased inflation and interest rates, which could make obtaining financing more difficult and/or expensive. As a consequence, we may not be able to secure additional financing to meet our operating requirements on acceptable terms, or at all. If we raise additional funds through the issuance of equity, equity-linked or debt financing arrangements, those securities and instruments may have rights, preferences or privileges senior to the rights of our common stock, and the holders of our equity securities may experience dilution. We will continue to monitor our liquidity during this time of historic disruption and volatility in the global capital markets. Credit Agreement and Debt Arrangements As of March 31, 2025, we had $3.3 billion principal amount of indebtedness outstanding. Our indebtedness includes unsecured 0.625% Convertible Senior Notes due 2025 (the “2025 Notes”), unsecured 1.00% Convertible Senior Notes due 2026 (the “2026 Notes”), unsecured 3.25% Convertible Senior Notes due 2027 (the “2027 Notes”), unsecured 3.50% Convertible Senior Notes due 2028 (the “2028 Notes”, and together with the 2025 Notes, 2026 Notes and 2027 Notes, the “Convertible Notes”), 7.250% Senior Secured Notes due 2029 (the “2029 Secured Notes”) and 7.750% Senior Secured Notes due 2030 (the “2030 Secured Notes”, together with the 2029 Secured Notes, the “Senior Secured Notes” and together with the Convertible Notes, the “Notes”). Under the terms of our Revolver, we may use proceeds to finance working capital, to refinance existing indebtedness and to provide funds for permitted acquisitions, repurchases of equity interests and other general corporate purposes. Any amounts outstanding under the Revolver are due at maturity. On March 13, 2025, Wayfair LLC (the “Issuer”), a subsidiary of Wayfair, issued $700 million aggregate principal amount of the 2030 Secured Notes. The 2030 Secured Notes will mature on September 15, 2030, unless earlier redeemed, in accordance with their terms or repurchased. The indenture contains covenants that restrict the Issuer’s ability and the ability of its restricted subsidiaries to, among other things, incur additional indebtedness, declare or pay dividends, redeem stock or make other 27 Table of Contents distributions or restricted payments, make certain investments, create certain liens, enter into certain transactions with affiliates, agree to certain restrictions on the ability of the Issuer’s restricted subsidiaries to make certain payments, sell or transfer certain assets and consolidate, merge, sell or otherwise dispose of all or substantially all of the Issuer’s or its restricted subsidiaries’ assets. On March 14, 2025, in connection with the issuance of the 2030 Secured Notes, we repurchased $578 million aggregate principal amount of the 2026 Notes. See Note 4, Debt and Other Financing , included in Part I, Item 1, Financial Statements , in this Quarterly Report on Form 10-Q for additional information on debt and other financing transactions. The conditional conversion features of the 2025 Notes, 2026 Notes, 2027 Notes and 2028 Notes were not triggered during the calendar quarter ended March 31, 2025, therefore, the 2025 Notes, 2026 Notes, 2027 Notes and 2028 Notes are not convertible during the calendar quarter ended June 30, 2025 pursuant to the applicable last reported sales price conditions. Whether any of the Convertible Notes will be convertible in future quarters will depend on the satisfaction of the applicable last reported sales price condition or another conversion condition in the future. If one or more holders elect to convert their Convertible Notes at a time when any such Convertible Notes are convertible, unless we elect to satisfy our conversion obligation by delivering solely shares of our Class A common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity. The credit agreement and indentures governing our convertible notes contain restrictions and covenants that may limit our operating flexibility. Specifically, the Revolver contains affirmative and negative covenants customarily applicable to senior secured credit facilities, including covenants that, among other things, limit or restrict our ability, subject to negotiated exceptions, to incur additional indebtedness and additional liens on our assets, engage in mergers or acquisitions or dispose of assets, pay dividends or make other distributions, voluntarily prepay other indebtedness, enter into transactions with affiliated persons, make investments, or change the nature of our businesses. The Revolver also requires us to maintain certain levels of performance in order to maintain our access to the Revolver. For instance, we are required to maintain a Consolidated Senior Secured Debt to Consolidated EBITDA Ratio (as defined in the credit agreement governing the Revolver) of 4.0 to 1.0, subject to a 0.5 step-up following certain permitted acquisitions. For information regarding our credit agreement and debt agreements, see Note 4, Debt and Other Financing , included in Part I, Item 1, Financial Statements , in this Quarterly Report on Form 10-Q and Note 6, Debt and Other Financing , included in Part II, Item 8, Financial Statements and Supplementary Data , in our Annual Report on Form 10-K for the year ended December 31, 2024. As of March 31, 2025, we were in compliance with all the terms and conditions of our debt agreements. Stock Repurchase Program On August 21, 2020, the board of directors (the “Board”) authorized the repurchase of up to $700 million of our Class A common stock in the open market, through privately negotiated transactions, or otherwise, including pursuant to a Rule 10b5-1 plan (the “2020 Repurchase Program”). On August 10, 2021, the Board authorized a new $1.0 billion share repurchase program on the same terms (the “2021 Repurchase Program” together with the 2020 Repurchase Program, the “Repurchase Programs”). There is no stated expiration date for the Share Repurchase Programs. We will begin repurchasing shares under the 2021 Repurchase Program upon the completion of the 2020 Repurchase Program. The Repurchase Programs do not obligate us to purchase any shares of our Class A common stock and have no expiration but may be suspended or terminated by the Board at any time. The actual timing, number and value of shares repurchased under the Repurchase Programs in the future will be determined by us in our discretion and will depend on a number of factors, including market conditions, applicable legal requirements, our capital needs and whether there is a better alternative use of capital. As of March 31, 2025, we have repurchased 2,354,491 shares of Class A common stock for approximately $612 million under the Repurchase Programs. 28 Table of Contents Trends and Historical Cash Flows Three Months Ended March 31, 2025 2024 (in millions) Net loss $ (113) $ (248) Net cash used in operating activities $ (96) $ (139) Net cash used in by investing activities $ (17) $ (75) Net cash provided by financing activities $ 140 $ — Operating Activities Cash flows in connection with operating activities consisted of net loss adjusted for certain non-cash items including depreciation and amortization, equity-based compensation and certain other non-cash expenses, as well as the effect of changes in working capital and other activities. Operating cash flows can be volatile and are sensitive to many factors, including changes in working capital and our net loss. Cash flows used in by operating activities decreased by $43 million during the three months ended March 31, 2025, compared to the same period in 2024, primarily due to a decrease in net loss adjusted for non-cash items of $68 million, partially offset by an increase of $25 million for cash changes in operating assets and liabilities. Investing Activities Cash flows used in investing activities decreased by $58 million during the three months ended March 31, 2025, compared to the same period in 2024, due to increases in sales and maturities of short- and long-term investments of $29 million, decreases in purchases of short- and long-term investments of $18 million and decreases in purchases of property and equipment and site and software development costs of $11 million. Purchases of property and equipment and site and software development costs (collectively, “Capital Expenditures”) were 1.6% of net revenue for the three months ended March 31, 2025 and related primarily to equipment purchases and improvements for leased warehouses within our expanding logistics network and ongoing investments, including our physical retail store expansion, proprietary technology and operational platform. Financing Activities Cash flows provided by financing activities increased by $140 million during the three months ended March 31, 2025, compared to the same period in 2024. The increase in cash provided by is due to net proceeds from the issuance of debt of $691 million, partially offset by payments to extinguish debt of $551 million. Off-Balance Sheet Arrangements We do not engage in any off-balance sheet activities. We do not have any off-balance sheet interest in variable interest entities, which include special purpose entities and other structured finance entities. Contractual Obligations During the three months ended March 31, 2025, we issued $700 million aggregate principal amount of the 2030 Secured Notes and repurchased $578 million aggregate principal amount of the 2026 Notes. See Note 4, Debt and Other Financing , included in Part I, Item 1, Financial Statements , in this Quarterly Report on Form 10-Q for additional information. Other than these financing transactions, there have been no material changes to our contractual obligations and estimates as compared to the contractual obligations described in Contractual Obligations included in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations , in our Annual Report on Form 10-K for the year ended December 31, 2024. 29 Table of Contents Non-GAAP Financial Measures To provide investors with additional information regarding our financial results, we have disclosed in this Quarterly Report on Form 10-Q the following non-GAAP financial measures: Adjusted EBITDA, Free Cash Flow, Adjusted Diluted Earnings or Loss per Share and Net Revenue Constant Currency Growth. Adjusted EBITDA We calculate Adjusted EBITDA as net income or loss before depreciation and amortization, equity-based compensation and related taxes, interest income or expense, net, other income or expense, net, provision or benefit for income taxes, non-recurring items and other items not indicative of our ongoing operating performance. We have provided a reconciliation below of Adjusted EBITDA to net income or loss, the most directly comparable GAAP financial measure. We disclose Adjusted EBITDA because it is a key measure used by our management and the Board to evaluate our operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. In particular, we believe the exclusion of certain expenses in calculating Adjusted EBITDA facilitates operating performance comparisons on a period-to-period basis as these costs may vary independent of business performance. For instance, we exclude the impact of equity-based compensation and related taxes as we do not consider this item to be indicative of our core operating performance. Investors should, however, understand that equity-based compensation and related taxes will be a significant recurring expense in our business and an important part of the compensation provided to our employees. Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and the Board. Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are: • Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; • Adjusted EBITDA does not reflect equity-based compensation and related taxes; • Adjusted EBITDA does not reflect changes in our working capital; • Adjusted EBITDA does not reflect income tax payments that may represent a reduction in cash available to us; • Adjusted EBITDA does not reflect interest expenses associated with our borrowings; • Adjusted EBITDA does not include other items not indicative of our ongoing operating performance; and • Other companies, including companies in our industry, may calculate Adjusted EBITDA differently, which reduces its usefulness as a comparative measure. Because of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures, including various cash flow metrics, net income or loss and our other GAAP results. 30 Table of Contents The following table reflects the reconciliation of net income or loss to Adjusted EBITDA for each of the periods indicated: Three Months Ended March 31, 2025 2024 (in millions) Reconciliation of Adjusted EBITDA: Net loss $ (113) $ (248) Depreciation and amortization 81 104 Equity-based compensation and related taxes 68 127 Interest expense, net 23 6 Other (income) expense, net (10) 4 Provision for income taxes 3 3 Other: Impairment and other related net charges (1) 23 — Restructuring charges (2) 56 79 Gain on debt extinguishment (3) (25) — Adjusted EBITDA $ 106 $ 75 (1) During the three months ended March 31, 2025, we recorded net charges of $23 million, inclusive of $20 million associated with the Germany Restructuring and weakened macroeconomic conditions in connection with our German operations and $3 million associated with changes in sublease market conditions for a technology center in the U.S. See Note 2, Supplemental Financial Statement Disclosures , included in Part I, Item 1, Financial Statements , in this Quarterly Report on Form 10-Q (2) During the three months ended March 31, 2025, we incurred $56 million of charges consisting primarily of one-time employee severance, benefits, relocation and transition costs. This is inclusive of $40 million related to the Germany Restructuring and $16 million related to the March 2025 workforce reduction. During the three months ended March 31, 2024, we incurred $79 million of charges consisting primarily of one-time employee severance and benefit costs associated with the January 2024 workforce reduction. (3) During the three months ended March 31, 2025, we recorded a $25 million gain on debt extinguishment upon repurchase of $578 million in aggregate principal amount of the 2026 Notes. Free Cash Flow We calculate Free Cash Flow as net cash provided by or used in operating activities less Capital Expenditures. We have provided a reconciliation below of Free Cash Flow to net cash provided by or used in operating activities, the most directly comparable GAAP financial measure. We disclose Free Cash Flow because it is an important indicator of our business performance as it measures the amount of cash we generate. Accordingly, we believe that Free Cash Flow provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management. Free Cash Flow has limitations as an analytical tool because it omits certain components of the cash flow statement and does not represent the residual cash flow available for discretionary expenditures. Further, other companies, including companies in our industry, may calculate Free Cash Flow differently. Accordingly, you should not consider Free Cash Flow in isolation or as a substitute for analysis of our results as reported under GAAP. Because of these limitations, you should consider Free Cash Flow alongside other financial performance measures, including net cash provided by or used in operating activities, Capital Expenditures, and our other GAAP results. 31 Table of Contents The following table presents a reconciliation of net cash provided by or used in operating activities to Free Cash Flow for each of the periods indicated: Three Months Ended March 31, 2025 2024 (in millions) Net cash used in operating activities $ (96) $ (139) Purchase of property and equipment (5) (13) Site and software development costs (38) (41) Free Cash Flow $ (139) $ (193) Net Revenue Constant Currency Growth We calculate Net Revenue Constant Currency Growth by translating the current period local currency net revenue by the currency exchange rates used to translate our financial statements in the comparable prior-year period. We disclose Net Revenue Constant Currency Growth because it is an important indicator of our operating results. Accordingly, we believe that Net Revenue Constant Currency Growth provides useful information to investors and others in understanding and evaluating trends in our operating results in the same manner as our management. Net Revenue Constant Currency Growth has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. For example, Net Revenue Constant Currency Growth rates, by their nature, exclude the impact of foreign exchange, which may have a material impact on net revenue. Adjusted Diluted Earnings or Loss per Share We calculate Adjusted Diluted Earnings or Loss per Share as net income or loss plus equity-based compensation and related taxes, provision or benefit for income taxes, non-recurring items, other items not indicative of our ongoing operating performance, and, if dilutive, interest expense associated with convertible debt instruments under the if-converted method divided by the weighted-average number of shares of common stock used in the computation of diluted earnings or loss per share. Accordingly, we believe that these adjustments to our adjusted diluted net income or loss before calculating per share amounts for all periods presented provide a more meaningful comparison between our operating results from period to period. Adjusted Diluted Earnings or Loss per Share has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. For example, Adjusted Diluted Earnings or Loss per Share, by their nature, excludes equity-based compensation and related taxes, provision or benefit for income taxes, non-recurring items, other items not indicative of our ongoing operating performance, and, if dilutive, interest expense associated with convertible debt instruments under the if-converted method. Because of these limitations, you should consider Adjusted Diluted Earnings or Loss per Share alongside other financial performance measures. 32 Table of Contents A reconciliation of the numerator and denominator for diluted earnings or loss per share, the most directly comparable GAAP financial measure, to the numerator and denominator for Adjusted Diluted Earnings or Loss per Share in order to calculate Adjusted Diluted Earnings or Loss per Share, is as follows: Three Months Ended March 31, 2025 2024 (in millions, except per share data) Numerator: Numerator for basic and diluted loss per share - net loss $ (113) $ (248) Adjustments to net loss Equity-based compensation and related taxes 68 127 Provision for income taxes 3 3 Other: Impairment and other related net charges 23 — Restructuring charges 56 79 Gain on debt extinguishment (25) — Numerator for Adjusted Diluted Earnings (Loss) per Share - Adjusted net income (loss) $ 12 $ (39) Denominator: Denominator for basic and diluted loss per share - weighted-average number of shares of common stock outstanding 127 120 Denominator for Adjusted Diluted Earnings (Loss) per Share - Adjusted weighted-average number of shares of common stock outstanding after the effect of dilutive securities 127 120 Diluted Loss per Share $ (0.89) $ (2.06) Adjusted Diluted Earnings (Loss) per Share $ 0.10 $ (0.32) Critical Accounting Policies and Estimates Our financial statements are prepared in accordance with accounting principles generally accepted in the U.S. The preparation of our financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amount of assets, liabilities, net revenue, costs and expenses and related disclosures. We believe that the estimates, assumptions and judgments involved in the accounting policies described below have the greatest potential impact on our financial statements and, therefore, we consider these to be our critical accounting policies. Accordingly, we evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions and conditions. There have been no material changes to our critical accounting policies and estimates since December 31, 2024. See Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in our Annual Report on Form 10-K for the year ended December 31, 2024 for a description of our critical accounting policies and estimates. Recent Accounting Pronouncements For information about recent accounting pronouncements, see Note 1, Summary of Significant Accounting Policies , included in Part I, Item 1, Financial Statements , in this Quarterly Report on Form 10-Q.